Kinder Morgan, Inc. (NYSE: KMI)
On Tuesday, the stock of Kinder Morgan, a North American energy infrastructure and transportation company, had it’s ninth consecutive day of heavy selling. The selling continued after the market closed as investors reacted to the company’s announcement that the 2016 dividend will be slightly reduced.
Kinder Morgan is not alone. The entire energy complex has been in a secular decline for more than a year, and yesterday crude oil reached it’s lowest levels since the end of the financial crisis in January 2009. This latest surge in energy sector selling was fueled by OPEC’s decision last week to maintain existing production levels and thereby continue to oversupply worldwide energy markets. As a result of the prolonged oversupply of oil and gas, North American drillers have been closing rigs at an alarming rate. At the end of last week the operating rig count was 914, its lowest level since October 1999 and 61% lower than the 2,342 rigs in operation just one year ago. Zacks
KMI Executive Comments
In the company’s press release announcing the dividend cut, Rich Kinder, executive chairman of the KMI board, said:
“We evaluated numerous options, including significant asset sales, but ultimately concluded that these other options were uneconomic to our investors in the long run. This decision was not made lightly, but we believe it is in the best interests of the company, its shareholders and employees. It will allow us to continue to maintain and grow our outstanding set of midstream energy assets without being required to issue equity at valuations prevalent in today’s market while maintaining a solid investment grade rating on our debt obligations. We are directly addressing concerns about our investment grade rating and concerns about the need to issue additional equity. We believe today’s action is beneficial to our shareholders.” BusinessWire
KMI Technical Analysis
As of Tuesday’s close, KMI was down 65% from April’s high of $44.71. The stock made new all-time lows during each of the past five trading days and continued to selloff to a low of $14.51 in after-hours trading. KMI is very oversold, but oversold conditions can persist for a long time particularly when an industry is going through a structural change. I will not trade KMI as a long unless it gets through $16.55 on strong volume. If the stock gets through $16.90, next levels are near $17.50 and $18. If KMI continues to selloff below $14.50, there really isn’t any technical level of support. On bounces, I will watch for resistance and potential reversal shorts at $15.15, $15.55 and $15.80.
About Kinder Morgan Inc.
Kinder Morgan, Inc. (KMI) is an energy infrastructure and energy company in North America. The Company operates through six segments: Natural Gas Pipelines, CO2, Terminals, Products Pipelines, Kinder Morgan Canada and Other. The Natural Gas Pipelines segment includes interstate and intrastate pipelines and its liquefied natural gas (LNG) terminals. The CO2 business segment produces, transports, and markets CO2. The Terminals segment includes the operations of its petroleum, chemical, ethanol and other liquids terminal facilities and all of its coal, petroleum coke, fertilizer, steel, ores and other dry-bulk material services facilities. The Products Pipelines segment consists of refined petroleum products, crude oil and condensate, and NGL pipelines and associated terminals, Southeast terminals, and its transmix processing facilities. The Kinder Morgan Canada segment includes its 100% owned and operated Trans Mountain pipeline system and a 25-mile Jet Fuel pipeline system. Google Finance